Why a Mexican department store chain is investing in a U.S. fintech

It’s not so unusual for a Silicon Valley lender to announce that it has raised $50 million in equity funding.

But a $50 million funding round led by a Mexican department store chain? That’s unexpected.

Insikt, a San Francisco-based lending startup, said Wednesday that Grupo Coppel, a privately held Mexican conglomerate, is the lead investor in its Series D round.

While the two companies might appear to be cut from different cloth — one is largely a brick-and-mortar retailer, while the other is striving to modernize the lending business — they actually have quite a lot in common. Both have expertise in providing credit to underserved consumers, and both serve working-class, largely Hispanic customer bases, though on two different sides of the border.

Insikt was co-founded in 2012 by James Gutierrez, an entrepreneur who has long been focused on bringing Latino immigrants into the U.S. financial mainstream.

His former company, known today as Oportun, provides installment loans to consumers, many of whom are Spanish speakers, at more than 245 locations in eight states.

Insikt plans to use its new funding to expand the number of stores where its loans are available. “We want to serve more people, not just Hispanics,” said founder and CEO James Gutierrez.

Gutierrez said that his vision for Insikt grew out of a realization that by partnering with existing retailers, he could offer credit to a similar customer demographic without operating a network of standalone stores. Today, Insikt’s installment loans are available in more than 600 stores in California, Texas, Illinois and Arizona, as well as online. The company’s partners include a Hispanic grocery store chain that has more than 40 locations in Southern California and a large operator of remittance shops.

Insikt’s loans carry interest rates that are substantially lower than those of payday loans, and they also offer an opportunity to build a credit history. Insikt said that it has processed 325,000 loan applications and made more than 120,000 loans.

“I’ve always felt that in order to make a dent on social change, you have to serve millions,” Gutierrez said.

He declined to disclose loss rates on the company’s existing loan portfolio, but said that bad loans are trending down as the company hones its credit models.

The funding round announced Wednesday brings Insikt’s total equity funding over the last five years to $100 million. The firm plan to use its new funding to expand the number of stores where its loans are available. “We believe we should be growing that network to 5,000-plus,” Gutierrez said.

Grupo Coppel has plenty of its own experience in consumer financial services. Roughly 70% of the retailer’s sales are financed through its own private-label credit system. And about a decade ago, the firm obtained a Mexican banking license.

Today, Grupo Coppel operates roughly 1,000 bank branches, mixing banking and commerce in a way that U.S. regulators have not allowed.

David Coppel, the chief merchant and a board member at Grupo Coppel, said that the Mexican conglomerate has been looking at opportunities to invest in fintech companies for the last five years.

The Mexican company chose to invest in Insikt largely because its leaders were impressed by Gutierrez and his team. Insikt currently has 140 employees in San Francisco and Los Angeles.

Another factor was the size of the U.S. economy, which dwarfs that of Mexico.

The two companies are planning to share data about their respective customer bases. “There’s just a long list of synergies around data and underwriting,” Gutierrez said. “We want to share a lot of knowledge both ways.”

Over time, Insikt plans to add new products, such as purchase financing, micro-business loans and credit cards for consumers who have proven that they can reliably pay back installment loans.

Gutierrez also has broader ambitions than just the Hispanic market in the U.S. He said that the company’s installment loans are appropriate for folks of many different backgrounds who cannot get approved by mainstream lenders.

“If you have three jobs, two jobs, you’re working hard, you care about your kids’ future, you know what? You shouldn’t be shut out of the system,” he said.

The partnership comes at a time of strained diplomatic relations between the U.S. and Mexico, but Gutierrez waved politics aside.

“We want to serve more people, not just Hispanics,” he said. “We’re serving the African-American community. We’re serving the Asian-American community. We’re serving folks that want to make America great again.”

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